7. Project-Based Activities

69. An LULUCF project can be defined as a planned set of activities aimed at
reducing greenhouse gas emissions or enhancing carbon stocks that is confined
to one or more geographic locations in the same country and specified time
period and institutional frameworks such as to allow net greenhouse gas emissions
or enhancing carbon stocks to be monitored and verified. Experience is being
gained in Activities Implemented Jointly (AIJ) and other LULUCF projects that
are under initial stages of implementation in at least 19 countries.

70. Assessment of the experience of these projects is constrained by the small
number, the limited range of project types, the uneven geographic distribution,
the short period of field operations to date, and the absence of an internationally
agreed set of guidelines and methods to establish baselines and quantify emissions
and uptake. Generally, these projects do not report all greenhouse gas emissions
or estimate leakage, and few have independent review.

Estimated
Emissions
Avoided from
Carbon Stocks
per Spatial Unit
during the
Project

assuming no leakage outside the project boundaries

Forest Protection (7)f

2.8

41 - 48

4 - 252

Improved Forest Management (3)

0.06

5.3

41 - 102

Reforestation and Afforestation (7)

0.1

10 - 10.4

26 - 328

Agroforestry (2)

0.2

10.5 - 10.8

26 - 56

Multi-Component and
Community Forest (2)

0.35

9.7

0.2 - 129

aProjects included are those for which we have sufficient data. Soil carbon
management, bioenergy, and other projects are not included for this reason.b"Some level of implementation"-Included projects have been partially funded
and have begun activities on the ground that will generate increases in carbon
stocks and reductions in greenhouse gas emissions.c"Other LULUCF projects"-Refers to selected non-AIJ projects and projects within
Annex I countries.dEstimated changes in carbon stocks generally have been reported by project
developers, do not use standardized methods, and may not be comparable; only some
have been independently reviewed.eNon-CO2 greenhouse gas emissions have not
been reported.fProtecting an existing forest does not necessarily ensure a long-term contribution
to the mitigation of the greenhouse effect because of the potential for leakage
and reversibility through human activities, disturbances, or environmental change.
Table 5 does not provide an assessment in relation to these issues. Sound project
design and management, accounting, and monitoring would be required to address
these issues.

71. However, through the experience of LULUCF projects aimed to mitigate climate
change, it is possible in some cases to develop approaches to address some
of the critical issues (seeTable 5).

73. Methods of financial analysis among these projects have not been comparable.
Moreover the cost calculations do not cover, in most instances, inter alia,
costs for infrastructure, monitoring, data collection and interpretation costs,
opportunity costs of land and maintenance, or other recurring costs, which
are often excluded or overlooked. Recognizing the different methods used,
the undiscounted cost and investment estimates range from $US 0.1-28 per ton
of carbon, simply dividing project cost by their total reported accumulated
carbon uptake or estimated emissions avoided, assuming no leakage outside
the project boundaries. [5.2.3]

74. Project-level financial analysis methods are widely used and fairly standardized
in development assistance and private investment projects. But they have yet
to be consistently applied to, and reported for, LULUCF projects aiming at
mitigating climate change. Guidelines for developing methods of financial
analysis may be needed in the future. [5.2.3]

75. LULUCF projects aiming to mitigate climate change may provide socioeconomic
and environmental benefits primarily within project boundaries, although they
may also pose risks of negative impacts. Experience from most of the pilot
projects to date indicates that involvement of local stakeholders in the design
and management of project activities is often critical. Other factors affecting
the capacity of projects to increase carbon uptake and avoid greenhouse gas
emissions and to have other benefits include consistency with national and/or
international sustainable development goals, and institutional and technical
capacity to develop and implement project guidelines and safeguards. [2.5.2,
5.6]

76. The accounting of changes in carbon stocks and net greenhouse gas emissions
involve a determination that project activities lead to changes in carbon
stocks and net greenhouse gas emissions that are additional to a without-project
baseline. Currently there is no standard method for determining baselines
and additionality. Approaches include determining project-specific baselines
or generic benchmarks. Most AIJ projects have used a project-specific approach
that has an advantage of using better knowledge of local conditions yielding
more accurate prediction. A disadvantage is that project developers may choose
scenarios that maximize their projected benefits. Baselines may be fixed throughout
the duration of a project or periodically adjusted. Baseline adjustments would
ensure more realistic estimates of changes in carbon uptake or greenhouse
gas emissions but would create uncertainties for project developers. [5.3.2,
Table 5-4]

77. Projects that reduce access to land, food, fiber, fuel, and timber resources
without offering alternatives may result in carbon leakage as people find
needed supplies elsewhere. A few pilot projects have been designed with the
aim of reducing leakage by explicitly incorporating components that supply
the resource needs of local communities (e.g., establishing fuelwood plantations
to reduce pressures on other forests), and that provide socioeconomic benefits
that create incentives to maintain the project. Due to leakage, the overall
consideration of the climate change mitigation effects of a project may require
assessments beyond the project boundary, as addressed in paragraph 49. [2.3,
5.3.3]

78. Project accounting and monitoring methods could be matched with project
conditions to address leakage issues. If leakage is likely to be small, then
the monitoring area can be set roughly equal to the project area. Conversely,
where leakage is likely to be significant the monitoring area could be expanded
beyond the project area, although this would be more difficult when the leakage
occurs across national boundaries. Two possible approaches could then be used
to estimate leakage. One would be to monitor key indicators of leakage, and
the second would be to use standard risk coefficients developed for project
type and region. In either case, leakage could be quantified and subsequently
changes in carbon stock and greenhouse gas emissions attributed to the project
could be reestimated. The effectiveness of these two approaches is untested.
[5.3.3]

79. LULUCF projects raise a particular issue with respect to permanence (see
paragraph 40). Different approaches have been proposed to address the duration
of projects in relation to their ability to increase carbon stocks and decrease
greenhouse gas emissions, inter alia: (i) They should be maintained in perpetuity
because their "reversal" at any point in time could invalidate a project;
and (ii) they should be maintained until they counteract the effect of an
equivalent amount of greenhouse gases emitted to the atmosphere. [5.3.4]

80. Several approaches could be used to estimate the changes in carbon stocks
and greenhouse gas emissions of LULUCF projects: (i) estimating carbon stocks
and greenhouse gas emissions at a given point in time; (ii) estimating the
average changes of carbon stocks or greenhouse gas emissions over time in
a project area; or (iii) allowing for only a part of the total changes in
carbon stocks or greenhouse gas emissions for each year that the project is
maintained (e.g., tonne-year method). The year-to-year distribution of changes
in carbon stocks and greenhouse gas emissions over the project duration varies
according to the accounting method used. [5.4.2, Table
5-9]

81. LULUCF projects are subject to a variety of risks because of their exposure
to natural and anthropogenic factors. Some of these risks particularly pertain
to land-use activities (e.g., fires, extreme meteorological events, and pests
for forests), while others are applicable to greenhouse gas mitigation projects
in both LULUCF and energy sectors such as political and economic risks. Risk
reduction could be addressed through a variety of approaches internal to the
project, such as introduction of good practice management systems, diversification
of project activities and funding sources, self-insurance reserves, involvement
of local stakeholders, external auditing, and verification. External approaches
for risk reduction include standard insurance services, regional carbon pools,
and portfolio diversification. [5.3.5]

82. Techniques and tools exist to measure carbon stocks in project areas relatively
precisely depending on the carbon pool. However, the same level of precision
for the climate change mitigation effects of the project may not be achievable
because of difficulties in establishing baselines and due to leakage. Currently,
there are no guidelines as to the level of precision to which pools should
be measured and monitored. Precision and cost of measuring and monitoring
are related. Preliminary limited data on measured and monitored relevant aboveground
and below-ground carbon pools to precision levels of about 10% of the mean
at a cost of about US$1-5 per hectare and US$0.10-0.50 per ton of carbon have
been reported. Qualified independent third-party verification could play an
essential role in ensuring unbiased monitoring. [5.4.1,
5.4.4]